By Ira Silver, CPA, CGMA, Principal, MBAF LLC
Sometimes going through the merger and acquisition process for an auto dealership may feel akin to facing a natural disaster! The truth is, you need to consider evaluating and updating your disaster preparedness and recovery plans any time a new acquisition is in the works. As dealerships merge, acquire new facilities and additional inventory, or expand operations, applicable location-specific threats, risks, and regulations are likely to change. Disaster planning and recovery can be broken down into three areas of concern:
- Pre-planning and general preparedness
- Preparedness when a threat is imminent
- Preparedness for post-disaster recovery
As a matter of course, any dealership should have an emergency management plan in place that addresses these three categories of disaster planning. That plan should be looked at and re-evaluated at least on an annual basis. However, anytime you are involved in an acquisition it is critical for all facilities involved to examine their readiness plans.
Know your new territory
A new acquisition means that whoever is responsible for the health, safety, and security of your dealership needs to be aware of any changes in location-specific regulations and threats and the necessary disaster response components needed for each location. Local emergency management offices can help identify the hazards in your area and outline the local plans and recommendations for each. By contacting the local emergency management office or local Red Cross office, you can find out what types of disasters are considered the most likely to occur in a specific community. You can obtain a list of the natural hazards that may affect any particular dealership, and the potential of various man-made risks by accessing IBHS’ interactive zip code map at https://www.disastersafety.org/zip-code-risk-search-results/. Even if the acquisition or expansion remains local, you need to make sure emergency plans, contingencies, and processes are all in alignment. Everyone needs to be “on the same page,” before a disaster occurs. Remember, your disaster preparedness plan isn’t only about your ability to prepare for and respond to natural disasters, but involves other potential threats to your operation. These can include, but are not limited to:
- Computer hacking and cyber-terrorism
- Catastrophic IT failure
- Acts of civil unrest
How you plan for each of these, can also change, or need to be modified upon expansion of your enterprise through M&A.
Coordinated Efforts
With a merger of dealerships it is incumbent upon the principals to integrate response plans under one centralized and coordinated effort. That will require open, distinct and frequent communications. It would be best to appoint a single individual to head up the consolidation of emergency preparedness practices. It is critical that preparedness objectives are clearly defined; redundancy and overlap be eliminated; and responsibilities before, during, and after a disaster are clear-cut and assigned. Should disaster strike, this helps eliminate any possible ambiguity or confusion. Any acquired dealership, personnel, and inventory will need to be assimilated into a company-wide emergency management program. If both parties already had plans in effect, a detailed audit or analysis should be conducted to identify any procedural, company policy, or compliance issues. After a merger or acquisition, ensuring compliance with regulations, guaranteeing employee safety and preparing an effective response will require a streamlined, coordinated, and well-practiced disaster response plan. With responsibility for multiple facilities, the new corporate enterprise should strive to create a culture of preparedness by implementing standardized company-wide best practices and response plans. With that as a template, it is relatively easy to “plug-in” site-specific modifications and streamline the process of assimilating acquired facilities into your preparedness programs.
Spread the word
Remember, there are many other stakeholders besides your employees and customers in your auto dealership’s disaster response plans. All of those stakeholders could be impacted by a merger or acquisition. They should all be informed of your M&A plans, so they too, can change, update, or modify their own preparedness plans and interactions with your facility accordingly. These include, but may not be limited to:
- Neighboring Businesses
- Local First Responders and Emergency Managers
- Government and municipal agencies
- Utility Companies
- Privately contracted emergency responders or security forces
Whether a merger or acquisition has expanded your operations across town or across the country a dealership-wide– and well-coordinated — disaster response program will be to everyone’s benefit. Not only will you be ensuring the safety of your people, and your ability to continue operations before, during and after a disaster, but, after an expansion, an uncoordinated or badly managed disaster response can negatively impact your company’s reputation, business interests, and relationship with key stakeholders.
Conclusion
By being prepared for potential disasters, dealerships large and small can minimize the effects of any crisis or emergency situation, keep their people and inventory safe, and return to normal business operations as soon as possible. Beyond that, when it’s time to expand, a proper disaster preparedness plan that is easy to update and modify will also put your dealership in a better position for long-term growth and longevity.
Ira Silver, CPA, CGMA, is a principal in the Tax and Accounting Department at MBAF and is the principal-in-charge of the firm’s Orlando office. Ira has been in the public accounting profession since 1982. He can be reached at (407) 781-0150 or isilver@mbafcpa.com
